By the end of 2015 we were tantalizingly close to having enough passive income that Adam could quit his office job. We’d exhausted our cash saving and used a HELOC on our home to buy more properties. The rental income more than paid for our mortgage and HELOC payments, but we needed more before Adam could tell everyone at work to fuck off.

Another issue was that this whole time housing prices had been steadily increasing. I would not be able to find any houses for $13k this time around!

Because​ I am a genius, I worked out that if the houses I wanted to buy kept selling for more and more, so would the houses I already owned.

See? Genius!

When the lease was up on the very first house we ever bought and rented– the one we’d downsized from– we did a few repairs, took a few pictures, and it sold in three days. We chose to sell this particular house for a few reasons:

1- We barely made any profit after the mortgage was paid. It was wonderful that we were able to essentially have someone else pay the mortgage while we waited out the recession, but I had better things to do with that money!

2- It was ten years old and still had all of its original, contractor-grade bits. Ten year old roof, ten year old HVAC, ten year old water heater…you get the idea. I wanted to unload the house before it started costing us tons of cash to keep it liveable.

3- We had a lot of money tied up in that house (we’d put 20% down on the mortgage), and it had appreciated significantly since we bought it, so we were able to make a hefty profit. It was by far the most expensive house we owned, and didn’t really fit into our business plan.

So, we sold it and had enough money to buy several small rentals. I had the idea to look at multifamily rentals because it seemed to be a good bang for your buck. The duplexes in my area cost only slightly more than a single family residence, but have the advantage of only having one roof, one property tax and insurance payment, etc.

Here is where things get silly.

Across the street from my home there is a duplex. Every week an older gentleman would come and care for the yard, but no one had ever lived there in the 5 years we’d lived in our home. I had set a rough goal of finding a duplex around $140k. I found a lender and knew I would need to put 25% down, which left me plenty of cash to do the same thing all over again. Using my noggin, I decided to just ask the fella working on the yard about the duplex.

Apparently it had been empty for 20 years!

He was 83 years old and had been faithfully caring for the property the whole time. He didn’t have a clear answer for why he hadn’t rented it in that time (I don’t want to say he was racist and didn’t want to rent to black and brown people, but he was racist and didn’t want to rent to black and brown people), but he was absolutely ecstatic that I was interested in buying it.

Here is our conversation, verbatim:

Me: So, Very Nice But Probably Super-Racist Guy, would you be interested in selling this?

VNBPSR Guy: Sure!

Me: K

I asked him to name a price, and he came up with $136k, which I determined to be less than my goal of $140k because I am good at math. It needed a little bit of work, but I got it done and rented to a some amazing people. It is the only rental I manage, mostly because it would feel very silly to call the property manager when the property is literally across the street.

So, I still had money to burn, and I still wanted a multi-unit property. I wanted to be able to use my money as a down payment on a property I could not afford to pay cash for. As always (including the duplex) I searched for a property that generated enough monthly cash flow that I was able to actually enjoy some of the rent after paying the mortgage. I stumbled across a weird little property in Gastonia that had three houses stacked one behind the other on a narrow lot. The houses were all on one parcel and couldn’t be separated, so were being sold all together. Better yet, they were all already rented! It was oddly difficult to find a loan for them because they were three separate structures rather than an actual multi-family property, but I called around and figured it the fuck out.

So, in summary, I sold a big ol house and bought five units total with the profit. We went from about $200/month cash flow (profit after mortgage and property manager) to $1800 in my pocket each month, just by moving the money around. After all of this (it took almost a year to sell, buy, and make repairs), we had ten rental units and finally enough passive monthly income that my husband could quit his job and become a professional dad/gamer.

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6 Comments

Entertaining, as always. Also educational! From where I sit, it seemed you have saved $$$ by doing lots of work yourself on both the big house you sold and on your self-managed place across the street. What is the plan for future repairs to your multiple units? Do you set aside a percentage, just plan to absorb costs, or what? I always felt a new furnace, water heater or roof could wipe out years of profit, so how do you prepare for that possibility with multiple units?

I prepare for big costs in a few different ways:
1) When I buy a house, I always front load the repairs. Ideally it already has decent or new windows/roof/HVAC/water heater when I buy it. If not, I consider those repairs part of the cost of acquiring the home and do them before we even rent the home or have a clear plan for when they should be done.
2) Should we encounter unexpected repairs, I always have some cash reserves, tons of unused credit, and (worse case) we could borrow against or sell one of the 6 properties we own free and clear.
3) All of our properties are insured, so depending on the repair it might be covered.
4) Most of the work we do on the houses comes off our taxes, anyway, so it’s not like money you sink into a repair on your own home

Really glad I found your blog through a FB group! 🙂 I enjoy reading your posts. My husband and I are currently expats from Canada living in Greece, and we rented out our first home in Canada when we left. We’re thinking through and planning to do what you’ve done and acquire more rental properties, in the hopes of generating enough passive income to retire early. Thanks for the information, I’ll be following your blog!

Thanks, Steph! Greece is so lovely… you’re living the dream! I hope you find the blog helpful. I really think anyone with a little disposable income can retire young; just coming from a place of “how” to do it rather than “if I can” do it is a giant first step. Good luck!

I think we need to find a better location for buying rentals 🙂 Finding anything nearby for under 100K is virtually impossible. I’ve enjoyed your 4 part series on how y’all retired early. We are working slowly towards it and do have one rental property (a detached 4 plex) and currently live in one. It is fantastic to have our mortgage covered by our renters.

It is absolutely pure luck that I live in close proximity to a rental market that aligns with my goals. I would say that doing some research to identify markets throughout the country like the one I’m invested in (low home prices, high percentage of renters, near or part of a major metropolitan area, growing economy) and then spending some time lurking on Zillow or something like it to familiarize myself with the market would be the path I’d take if I had to buy remotely. I actually haven’t even visited the last 4 houses we’ve bought because I am LAZY. I’ve only seen most of them for about five minutes when I was house hunting, so it isn’t a big mental stretch to me to buy in another city. Just go slowly and double check credentials and reviews of anyone helping you.